Twitter CEO's First Tough Call: Laying Off 336 Employees

Jack Dorsey says that the purpose of laying off all those people is to get new services up and running quicker for clients.

Twitter CEO, co-founder and Chairman of the Board Jack Dorsey had to make his first hard decision Oct. 13 since being drafted Oct. 5 to replace Dick Costolo, who had put five years into the job.
Dorsey hasn't yet used the hackneyed terms "streamline" or "leaner" that we know of, but he did reveal Oct. 13 in a Form 8K filing to the Securities and Exchange Commission ahead of the company's Oct. 27 quarterly earnings report that he will be trimming about 8 percent (or 336 jobs) in the San Francisco-based social network's employee base.
"The restructuring is part of an overall plan to organize around the company's top product priorities and drive efficiencies throughout the company," the report said. "The company intends to reinvest savings in its most important priorities to drive growth."
It seems counterintuitive, but in the affidavit Dorsey said that the purpose of laying off 336 people is to get new services—mostly advertising and marketing initiatives—up and running faster for clients. The inference here is that there either aren't enough new projects for developers to work on or that the ones they are developing aren't coming to market quickly enough to the satisfaction of management.

'Tough but Necessary Decisions'

Dorsey tweeted the following on Oct. 13: "Made some tough but necessary decisions that enable Twitter to move with greater focus and reinvest in our growth."
The CEO's email to all Twitter employees included the following excerpt:
"We are moving forward with a restructuring of our workforce so we can put our company on a stronger path to grow. Emails like this are usually riddled with corporate speak so I'm going to give it to you straight.
"The team has been working around the clock to produce streamlined roadmap for Twitter, Vine, and Periscope and they are shaping up to be strong. The roadmap is focused on the experiences which will have the greatest impact. We launched the first of these experiences last week with Moments, a great beginning, and a bold peek into the future of how people will see what's going on in the world.
"The roadmap is also a plan to change how we work, and what we need to do that work. Product and Engineering are going to make the most significant structural changes to reflect our plan ahead. We feel strongly that engineering will move much faster with a smaller and nimbler team, while remaining the biggest percentage of our workforce. And the rest of the organization will be streamlined in parallel.
"So we have made an extremely tough decision: we plan to part ways with up to 336 people from across the company. We are doing this with the utmost respect for each and every person. This isn't easy. But it is right. The world needs a strong Twitter, and this is another step to get there."
Cuts Mostly in Product, Engineering Teams
Thus, most of the job cuts will be in the product and engineering departments. Twitter apparently has over-hired in those groups, which has resulted in overlapping duties. Former employees have been reported as saying this has created a culture of indecision and made it harder for the company to move quickly.
The cuts will not involve executives, Twitter said. The restructuring and severance costs will amount to between $5 million and $15 million. The company employs 4,100 people and has about 316 million regular users, according to Statistica.
Also in the Oct. 13 SEC report, Twitter said it expects revenue and adjusted EBITDA (net income with interest, taxes, depreciation and amortization added back to it) for the third quarter of 2015 to be "at or above the high end of the previously forecasted ranges of $545 million to $560 million and $110 million to $115 million," respectively. Analysts have estimated Twitter will generate $2.2 billion this year.
One of the things Twitter undoubtedly will need to improve is retention of its users. It faces stiff competition from newer messaging networks, such as Snapchat and Facebook's Instagram and WhatsApp, among others. Another concern, reflected in a recent Wells Fargo report and reported by Bloomberg News, contended there are millions of accounts that are never used.
CivicScience, a real-time consumer intelligence company, said Oct. 13 its research shows that about 10 percent of 88,000-plus U.S. people polled in the past 18 months say they have abandoned use of Twitter. That's a high percentage for a company that must continue to expand its user base to succeed.
CivicScience said that the new Moments feature might recapture former users. Moments tries to transform Twitter's nonintuitive timeline into a series of narratives that are easily navigated by people not familiar with the service's rituals.
For the moment, CivicScience reports the following data points about Twitter's lapsed users:

They lean younger: They're more likely than average to be under age 35; they are 32 percent more likely to not have graduated from high school yet; and they are 35 percent more likely to still live with mom and dad.

They are 13 percent more likely to be female (split is 43 percent male and 57 percent female).

They are also 148 percent more likely to have abandoned use of Snapchat and 209 percent more likely to have abandoned use of Instagram too.

They are not as likely as active Twitter users to enjoy telling others about new brands or technology.